The 11 cents per litre levy on fresh milk is to be scrapped following the passing of the Dairy Adjustment Levy Termination Bill 2008 through the Senate yesterday.

The levy was established by the Howard Government in 2000 to fund an adjustment package for the dairy industry as it moved through deregulation. Around $240 million a year has been collected through the levy, to provide payments to around 13,000 dairy businesses over eight years.

“The move to terminate the Dairy Adjustment Levy has been welcomed on the grounds that it should lead to a reduction in milk prices by 11 cents a litre,” the Senate said in a statement.

Minister for Agriculture, Fisheries and Forestry, Tony Bourke has previously warned that a saving should be seen at the checkout and the ACCC will be monitoring retailers to ensure they don’t engage in ‘anti-competitive conduct’. “While this measure is expected to result in a small saving, we know that increased demand and drought have forced milk prices up in recent years,” he said upon the introduction of the legislation to the House of Representatives in September. “We expect the removal of the levy to be passed on to consumers. Any complaint or suggestion of anti-competitive conduct over the removal of the levy will be dealt with by the Australian Competition and Consumer Commission (ACCC).”

The levy funded a number of measures to help dairy farmers adjust to the removal of state and Commonwealth government price support measures.

It will be removed once the fund is brought into balance – as per statutory requirements – originally anticipated to be early next year.